Should you use a financial planner?

You need to have trust and confidence in the professional standards of your financial planner and their capabilities to advise you now and in the future. Don't be afraid to ask your prospective financial planner questions about their:

  • Relevant qualifications such as a Diploma in Financial Planning and Certified Financial Planner® (CFP®) qualifications
  • Who they are licensed through
  • Length of financial planning experience
  • Areas of expertise e.g. superannuation and retirement planning
  • Membership of professional associations or bodies such as the Financial Planning Association of Australia (FPA) and the Association of Financial Advisers (AFA). You should also ask the financial planner how they calculate and charge for their services.

The government is currently proposing even greater levels of professional and educational standards to come into effect over the next few years, but let’s take a closer look at the current requirements that financial planners must fulfil.

Educational standards
The complexity of the modern day investment environment requires a high level of knowledge when it comes to offering advice to consumers about how to navigate their options, build wealth, protect assets and improve their financial situation. To this end, financial planners are now required to undergo specific training and achieve certain levels of qualification in order to operate a financial advice practice.

The Australian Securities and Investment Commission (ASIC) maintain a register that financial planners must subscribe to in order to verify their professional standards. This includes evidence of their educational accomplishments and membership of professional associations.

The Commission sets out the minimum educational standards that a financial planner must achieve. They also manage a register of approved courses that can be undertaken, so that there is independent scrutiny of the quality of education. These courses are aimed at giving financial advisers a Diploma level qualification that equips them with the competence, specialist knowledge and skills required to advise on financial products and markets. This includes being competent in areas such as:

  • analysis and planning approaches to technical problems and client issues
  • developing and analysing strategies for clients
  • evaluating information for planning and research purposes
  • selection of products and services for clients
  • legal, compliance and disclosure requirements relating to each product area.

The specific product areas that ASIC requires financial planners to be proficient in include:

  • Managed investments
  • Superannuation
  • Foreign exchange
  • Margin lending facilities
  • Securities
  • Derivatives

Advisers are also obligated to take part in continuing training to maintain and update the knowledge and skills required to provide quality advice to their clients.

Professional associations
Apart from educational qualifications, ASIC also requires financial advisers to maintain membership of an appropriate professional association, such as the Association of Financial Advisers (AFA) and the Financial Planning Association of Australia (FPA). These organisations support and promote professional conduct and among financial planners and maintain a code of ethics that they must subscribe to.

How can you be sure?
The relationship you have with your financial planner is one that should continue for years into the future, so you need to be sure it is one based on complete trust and confidence. This means that from the outset you should feel free to ask them about their capabilities, qualifications, financial planning experience and areas of expertise.

Most financial planners operate will under the umbrella of a ‘licensee’ planning firm, so find out as much as you can about the organisation that they are licensed through. What is its history and reputation? What sort of clients does the organisation service? What sort of investment research, technical and support services do they provide? What training does the organisation provide for its financial planners? All of these issues underpin the quality of advice the financial planner can provide.

The bottom line is that having a financial planner gives you the potential for building and securing your financial independence through the skills and knowledge they bring to the table. It’s not just about knowledge and skill, however - the long term nature of a financial planning relationship means that you must be comfortable and confident at a personal level, so make sure you engage actively with a prospective financial planner to assess their suitability for you.

What advantages have you experienced through obtaining good financial advice? Share your experience below.

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